Noah Smith: Understand the Energy Department before opting to close it

Sunday

Jan 1, 2017 at 3:15 PM

By Noah Smith

When you hear the name Rick Perry, you might recall that time during the 2012 Republican presidential primary race where he forgot the name of a government agency he wanted to eliminate. After saying he wanted to ax the departments of Commerce and Education, he blanked on the third. Later in the debate, he said that his forgotten target for destruction was the Department of Energy.

A responsible leader doesn’t forget the name of a government agency that he wants to shut down. A responsible leader studies the department in detail, learning all of the things that it does, and thinks about how things would change if the department were abolished. And so for Perry, that “oops” moment was enough to persuade voters that he lacked the firm grasp of the facts needed in a presidential candidate. He soon abandoned the race.

In a recent op-ed in the Washington Examiner, economist Peter Grossman of Butler University also called for the Energy Department to be closed. Grossman views the Energy Department as a panicked response to 1970s-era theories of looming fossil-fuel scarcity:“The DOE was conceived in dark and pessimistic beliefs and forecasts that have proven totally wrong .... The original legislation justified a Department of Energy because .... we were (supposedly) rapidly running out of fossil fuels, especially oil and natural gas.”

In reality, the department was created in an effort to increase government efficiency by combining of a bunch of existing agencies. One of these was the Energy Research and Development Administration, the successor to the Atomic Energy Commission, which itself grew out of the Manhattan Project. That agency managed the U.S.’s nuclear weapons programs. This is still one of the Energy Department’s jobs — it includes the National Nuclear Security Administration, which oversees the safety of the U.S. nuclear stockpile.

Let that sink in a moment. Grossman is proposing to abolish the agency that keeps U.S. nuclear weapons safe. He doesn’t appear to have thought about who would take over that task, or whether valuable experience and knowledge would be lost in the hand-off.

But even if we forgive these oversights, Grossman’s story doesn’t add up. The Energy Department’s roots in nuclear energy also show it wasn’t simply a response to high oil prices. Government support for nuclear power boomed in the 1950s, when oil was cheap.

The goal wasn’t to avert a fossil-fuel crunch, but to give humanity even cheaper sources of power.

That’s still the department’s goal. As Bloomberg New Energy Finance reports, solar energy is now cheaper than coal power in many places, even without government subsidies, and is getting cheaper still.

Solar’s rise hasn’t come because of a fundamental technological leap, but because of learning curves. As production rises, prices tend to fall. That means the Energy Department’s subsidy programs, which encouraged solar growth back before the economics made sense, had a hand in jump-starting the era of abundant energy we now see stretching before us.

Grossman doesn’t acknowledge this. He writes that “the only energy breakthrough of the last four decades has been fracking.” That’s a bit like saying the only new piece of consumer electronics in the last four decades was the flat-screen TV.

So no, we shouldn’t heed Grossman’s call to abolish the department. More to the point, we should stop rewarding intellectuals and politicians for casually calling for the abolition of government agencies in the absence of understanding what they actually do.

No doubt, my call is likely to fall on deaf ears, at least while the Trump administration is in power: Perry has just been nominated to head the Energy Department.

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.